DOWNFALL OF THE ROGUE REGISTRARS: LESSONS FROM THE DELL CASE
Posted June 18th, 2008
Say you and your business colleagues make money off registering domain names, in some instances by registering random names and parking them with advertising. Then you decide to register some names that happen to be very similar to some existing company names (say, delllcomputer.com). Even better – you decide to set up your own domain name registrars to take the enterprise to the next level. Fast forward – you have multiple registrar entities, offering domains to the public and hosting your own collection of domains. In fact, you and your associates now own millions of domain names under a variety of false names and using various third-party trademarks. And they’re generating serious advertising dollars. Further, many of the domain names you never actually pay for – but rather “taste” – register for 5 days on a contingent basis and then drop (permissible under current ICANN policies).
If someone complains, simply give the domain name to them or, if they bring a UDRP against the domain name owner (who is also you), default and facilitate the transfer. Pretty nifty – set up a massive typosquatting empire by owning your own registrars (like counterfeiters owning a bank).
In 2007, Dell Computer Corporation discovered a massive enterprise like that described above – ICANN-approved registrars (Domain Doorman, LLC; BelgiumDomains, LLC, CapitolDomains, LLC, and iHoldings.com) set up as a front to facilitate the registration of millions of typosquat domain names, including over 1,100 Dell-related typosquat domain names (such as dellcompeuters.com, del-dimension.com, dellcomputelaptopr.com and dellcustomersrevice.com). After noticing strange commonalities between the various typosquat domain name records, Dell’s counsel, David Steele of the Christie Parker & Hale firm (www.cph.com), began an investigation into the doings of these registrars. Surprisingly, or maybe not, they were all owned by the same group of individuals through a complex web of a dozen offshore companies (most claiming to be based in the Caribbean). Further, Dell was able to tie the disputed domain names back to the same individuals and businesses who owned the registrars.
Dell was also able to verify that domain tasting was occurring through public registry records. For example, as alleged in Dell’s Complaint (now unsealed), one domain name, delllptop.com, was registered for 5 days and dropped in succession as follows:
l registered by Domain Doorman on 5/25/07, deleted 5/30/07;
l registered by BelgiumDomains on 5/30/07, deleted 06/04/07;
l registered by Capitoldomains on 06/04/07, deleted 06/09/07;
l registered by Domain Doorman on 06/09/07, deleted on 06/14/07; and
l registered by BelgiumDomains on 06/14/07.
In fact, as noted by Brian Krebs of the Washington Post in November 2007, these 3 registrars were able to register and drop in excess of six million domain names in a 30-day period – and all in compliance with current ICANN policy. It is not surprising that these entities were also the subject of many UDRP proceedings (including one by the author). Something was definitely wrong.
Utilizing provisions of Lanham Act and the Federal Rules of Civil Procedure, Dell filed a Complaint under seal (i.e., a secret Complaint) on October 10, 2007 in the Southern District of Florida in Miami against the various ownership group members of the registrars and domain names. Then Dell sought and obtained an injunction barring the registrars from transferring, tasting, or trafficking in, any of the disputed names and also preventing destruction of any related evidence. Shortly thereafter, U.S. Marshals entered the premises of one of the principals of the rogue registrants with no advance warning and seized company hard drives. This act of seizure allowed Dell and its counsel unique access into the strange world of large-scale typosquatting and a quick way to bring a big problem to an end.
The Dell operation against the Florida-based typosquatters has generated discussion on steps to prevent or discourage domain name “tasting,” among other things. As noted above, current practice permits entities to register a domain name on a contingent basis for free for up to 5 days. During that time, the temporary owner can reap, on a macro level, significant money in ad clicks. ICANN is currently taking comments and investigating the possibility of requiring some payment as part of any domain name registration (as the Public Interest Registry has already done for .org domains). This step could decrease domain tasting, but would still do little to prevent large-scale registration of typosquat domain names.
Keep in mind that all the foregoing business operations, court process and subsequent administration is for a bunch of domains that never needed to come into existence in the first place. Currently to protect themselves companies are forced to incur the expense of registering every possible spelling variation of their name to prevent improper use by a third party. But dealing with the issue on an ad hoc basis is expensive as well. A $6 domain name with a parked ad site could cost well over $2000 to take possession of through a UDRP. For better or worse, it is easy and inexpensive to register domain names. Yet, when the domain names are tied to real-world entities and people, they can take on tremendous value – or be a source of major irritation.
The Dell case is especially unusual because the domain name registrars were themselves the cybersquatters who propagated the international domain name fraud. To state the obvious, registrars would be well-counseled to comply with all ICANN policies and federal trademark statutes and avoid the sharp practices of the Florida registrars. The consequences of non-compliance can be severe. The Florida registrars in question could be permanently shut down and their entire domain name portfolio transferred to third parties.
Brand owners can learn from this situation. Dig deeper if (a) domain names of concern emanate repeatedly from one particular registrar (especially a lower-profile registrar), (b) registrars with different names operate out of the same business address (especially an offshore address), or (c) a particular company or individual has repeatedly registered disputed domain names.
-Ernest Grumbles is an IP litigator and portfolio counselor at Merchant & Gould and the co-host of IP podcast BP/G Radio (www.bpgradio.com). Ernest especially enjoys working with start-ups and early-stage ventures to identify, develop and protect IP assets.
Posted in Uncategorized by Ernest Grumbles
